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Topic: How Banks Create Money
Skill: Definition
33) Suppose the required reserve ratio is 20%, A $40 million cash deposit will, at most, allow an
expansion of the money supply to

Respuesta :

Answer:

$200 million

Explanation:

Increase in the total value of checkable deposit is determined by the money multiplier

Money multiplier = amount deposited /required  reserve requirement

Required reserve requirement is the percentage of deposits required of banks to keep as reserves by the central bank

$40 million / 0.2 = $200 million

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